IDEAS home Printed from https://ideas.repec.org/a/taf/rjerxx/v46y2024i4p444-477.html
   My bibliography  Save this article

Using REIT Follow-on Equity Offerings to Pay down Credit Line Balances: Bank Certification or Monitored Financial Flexibility?

Author

Listed:
  • Vladimir A. Gatchev
  • Nandkumar Nayar
  • S. McKay Price
  • Ajai Singh

Abstract

Using hand collected data from offering prospectuses and other corporate filings, we examine the market response to real estate investment trust (REIT) follow-on stock offerings’ stated uses of proceeds. We also track REIT banking relationships over time. Consistent with the idea of bank certification, we show that markets react relatively favorably to REIT equity offers where issuers have lending relationships with affiliates of the underwriters. However, we also find that reactions are most favorable where REIT issuers intend to repay their bank’s line of credit, regardless of the bank’s affiliation with the underwriters. This pattern is particularly strong among smaller firms with lower institutional ownership. We posit that credit line repayments preserve benefits of bank monitoring while enhancing financial flexibility. Further examination reveals that this monitored financial flexibility is the dominant effect.

Suggested Citation

  • Vladimir A. Gatchev & Nandkumar Nayar & S. McKay Price & Ajai Singh, 2024. "Using REIT Follow-on Equity Offerings to Pay down Credit Line Balances: Bank Certification or Monitored Financial Flexibility?," Journal of Real Estate Research, Taylor & Francis Journals, vol. 46(4), pages 444-477, October.
    • Handle: RePEc:taf:rjerxx:v:46:y:2024:i:4:p:444-477
    DOI: 10.1080/08965803.2023.2263246
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/08965803.2023.2263246
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/08965803.2023.2263246?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:rjerxx:v:46:y:2024:i:4:p:444-477. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/rjer20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.